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Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see WisdomTree, Inc. (NYSE:WT) is about to trade ex-dividend in the next three days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Therefore, if you purchase WisdomTree's shares on or after the 12th of February, you won't be eligible to receive the dividend, when it is paid on the 26th of February.
The company's upcoming dividend is US$0.03 a share, following on from the last 12 months, when the company distributed a total of US$0.12 per share to shareholders. Last year's total dividend payments show that WisdomTree has a trailing yield of 1.3% on the current share price of US$9.53. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
View our latest analysis for WisdomTree
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. That's why it's good to see WisdomTree paying out a modest 26% of its earnings.
When a company paid out less in dividends than it earned in profit, this generally suggests its dividend is affordable. The lower the % of its profit that it pays out, the greater the margin of safety for the dividend if the business enters a downturn.
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see WisdomTree's earnings have been skyrocketing, up 54% per annum for the past five years.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. WisdomTree's dividend payments per share have declined at 9.3% per year on average over the past 10 years, which is uninspiring. It's unusual to see earnings per share increasing at the same time as dividends per share have been in decline. We'd hope it's because the company is reinvesting heavily in its business, but it could also suggest business is lumpy.